This is the little-used home page for James P. Pinkerton. I am the Co-Chair of the RATE Coalition. I am a former columnist for Newsday, and a former contributor to the Fox News Channel. Way back when, I worked as a domestic policy aide in the Reagan and Bush 41 White Houses. Please visit my other blog, CureStrategy.org

Wednesday, December 31, 2008

Tuesday, December 23, 2008

Yes We Can Reward Failure!

Should one of the geniuses who helped run Citigroup off a cliff now move over to a top job at the State Department? Should there be any penalty for failure--or should failures get promoted, if they know the right people?

As so often happens, The New York Times got the scoop on a hot story this morning: The headline reads, “Clinton Moves to Widen Role of State Dept.” The story concerns the efforts by Hillary Rodham Clinton, the incoming Secretary of State, to enlarge the “turf” of her new department.

And as so often also happens, the Times missed the hottest part of its own story: the upward mobility of yet another Wall Street bailout recipient. This is from the second graf of the Times story: Mrs. Clinton is recruiting Jacob J. Lew, the budget director under President Bill Clinton, as one of two deputies, according to people close to the Obama transition team. Mr. Lew’s focus, they said, will be on increasing the share of financing that goes to the diplomatic corps.

OK, fine. But is there anything else we should know about Lew? Deep in the story, the Times adds this bit of biography: “A well-connected figure who was once an aide to Speaker Thomas P. O’Neill, Mr. Lew now works for Citigroup in a unit that oversees hedge funds.” [emphasis added]

Now let’s see here. Citigroup, Citigroup. Would that be the same Citigroup that employs Bob Rubin as chairman of its executive committee? The same Bob Rubin who was Lew’s Clinton Administration colleague when Rubin ran Treasury and Lew ran the Office of Management and Budget? And more recently, the two of them have been colleagues at Citigroup? And now Rubin is a top adviser to President-elect Barack Obama, and Lew might be joining the State Department in a top slot? And hedge funds--aren’t those the squirrelly investments that nobody really understands--not even Wall Street’s “masters of the universe”?

Monday, December 01, 2008

CHRIS WALLACE IN THE LIBERAL LION'S DEN!

Tonight's D.C. showing of “Frost/Nixon” was an early holiday gift to Beltway liberals, delivering glad tidings of anti-Nixonian feelgood to the permanent Washington establishment, which has felt shut out of power for so long, during the dark night of Gingrich-DeLay-Bush these past 15 years, before the Obama dawn. But even during this happy masque of lefty triumphalism, Fox News’ Chris Wallace threw a fair-and-balanced apple of discord into the middle of the festivities. Wallace had the nerve to defend George W. Bush from the ongoing liberal effort to Nixonize the 43rd President.

After the screening of the film, at the National Geographic Society headquarters in downtown D.C., director Ron Howard, playwright/screenwriter Peter Morgan, and Nixon-hater James Reston Jr. (son of the legendary New York Times columnist) appeared onstage for a question-and-answer session with the audience, moderated by Robert Dallek, the retired Boston University professor and well-known historian. Howard was, well, Hollywood-ish, talking about the making of the film and the screen-testing of various alternate endings. And Morgan was arty and somewhat abstract, seemingly more hostile to Frost—who conducted the 1977 “checkbook journalism” interviews with the disgraced 37th President that are the heart of the film—than to Richard Nixon. But Reston, portrayed in the film as a young Nixon-hating researcher for Frost, was relentlessly vehement, using every occasion he could to steer the discussion back to Nixon’s “criminality” and the need to confront it. Again. And again. And again.

Then Reston went further, declaring that the film was “a metaphor for George W. Bush,” a theme that Howard and Dallek, at least, seemed comfortable with. That was fine for the liberal multitudes in the audience, including former CBS News reporter Daniel Schorr, now up in his 90s, who proudly recollected for the audience that he was “Number fourteen on Nixon’s enemies list,” and former Watergate Committee counsel Richard Ben-Veniste, who resurfaced in 2004 as one of the 9-11 Commissioners.

But then “Fox News Sunday” anchorman Chris Wallace, braving the liberal wind, asked a question, which was actually more of an accusation. “To compare George W. Bush to Richard Nixon is to trivialize Nixon’s crimes and is a disservice to Bush,” Wallace said. Recalling that 3000 people were killed on 9-11, and noting that there hadn’t been any attacks on U.S. soil since, Wallace suggested that something had been done right. That’s why, he said, “we are all sitting here tonight so comfortably”—and not afraid of another terrorist attack. Moreover, Wallace said, “Richard Nixon’s crimes were committed solely for his own political gain, whereas George W. Bush was trying to protect the American people.” To suggest otherwise, Wallace insisted, “was a grave misrepresentation of history, then and now.” And, amazingly, Wallace received a smattering of applause.

Seemingly not wanting to get into a fight with the TV man, Dallek answered that we knew full well of Nixon’s criminality because of the Watergate tapes, but that no similar documentary record existed yet for Bush. Only when such information comes out, Dallek suggested, would the full horror of Bush’s presidency become visible. Which, of course, proved Wallace’s point: It was not fair to equate proven facts about Nixon with mere allegations about Bush.

“You make suppositions on no facts whatsoever,” Wallace concluded.

“Do you read The New York Times?” Dallek countered. That might not have been the strongest comeback ever, but it worked just fine with this audience. And with that, the Q & A session resumed its liberal course for the rest of the evening.

Thursday, November 13, 2008

I just posted this on The Politico'sArena website. The question was, "does anyone get what's happening with our $700 billion?" And my answer:No one knows what’s happening on the bailout—and that’s the point. Power never wants accountability, and money never wants transparency.

It’s hard to blame the revolving-door Wall Streeters, the ones running the program, for operating this way. It’s the only way they know. Sharks can’t help themselves.

But it is easy, and necessary, to blame those who claim to represent Main Street for voting for it—they should have known better.

Wednesday, November 12, 2008

Miami – Here at the Republican Governors Association annual meeting, there is no great sense of defeat, but rather a sense of positive anticipation—and for good reason.

Despite the general GOP wipeout of 2008, no incumbent Republican governor was defeated for re-election this year; in fact, two Republican incumbents, Mitch Daniels of Indiana and Jim Douglas of Vermont, hung on, even as their states went for Obama. Indeed, the case of Vermont’s Douglas is particularly striking: he won a fourth term with nearly 55 percent of the vote, while Obama was winning the Green Mountain State by more than 2:1.

So while the Party’s presidential candidate, and its Congressional wing, were both soundly repudiated at the polls earlier this month, Republican governors did well. Republicans still have 21 governors—including a certifiably hot political property for the future, Alaska Governor Sarah Palin, who speaks here this afternoon. And staffers at the Republican Governors Association (RGA) look forward to 36 governorships are up for grabs in 2010. With George W. Bush and his deep unpopularity gone from the White House, and Barack Obama the incumbent, the “off year” election of ‘10 is likely to go quite well for the Republicans. The RGA could well find itself back in the majority come 2011.

And in the shorter term, the RGA has gotten some big breaks: In a grotesque sign of arrogant hubris, Terry McAuliffe, a former Democratic National Committee chairman and chairman of Hillary Clinton’s presidential campaign, has announced that he wants to run for governor of Virginia in the “off off year” of 2009. McAuliffe’s ambition is a huge gift to Republicans: Take a Democratic wheeler-dealer, born in upstate New York, then transplant him to the Beltway, where he made millions as a K Street operative—and then turn him loose on the Old Dominion. Yes, Virginia is changing (Obama carried it) but it hasn’t changed so much that lobbyists can buy the Richmond state house. McAuliffe is exactly the sort of over-reach that Democrats don’t need. But it’s what they’ve got, as Democrats over-interpret the 2008 election.

And returning to the longer term, the defeat of Sen. John McCain only underscores the reality that statehouses are the best springboards to the presidency; the last time that a Republican Senator or Congressman went directly to the White House was 1920.

Ed Tobin, a former executive director of the RGA, now a lawyer in Boston, offers an explanation for gubernatorial effectiveness, “Governors are leaders—they have to be. Governors have to produce. They have to make decisions every day, on how balance budgets and manage programs—and be held accountable for what they do. By comparison, the Senate is a debating society, and the House is too often captured by pork barrelers and earmarkers.”

But there’s is a paradox here. Compared to the outgoing Republican in the White House, and the surviving group of Republicans on Congress, governors might be the most effective, but they get the least attention. Out in the states, from Alaska to Florida, governors do their thing—and receive little attention for what they do, beyond their own state.

Indeed, the political and policy discussion in Washington and New York is dominated by policy wonks and freelance ideologues, plus whatever Member of Congress has the time to speak at a think-tank seminar—or go on cable TV. That is, the “national” debate eclipses the state-by-state actions of governors, in both parties.

For their part, governors just plug along in their states, confident that their own constituents will be able to judge their performance.

But of course, whenever a party gets tired of losing nationwide, it is well advised to look out to the states, and the statehouses, for new talent.

As Tobin, the former RGA staffer, puts it, “Governors are closer to the people. They have their principles, but they are also pragmatic.”

Thursday, November 06, 2008

So President-elect Obama has asked Cong. Rahm Emanuel (D-Ill.) to be his White House chief of staff. I am a little surprised that Emanuel would consider taking the job; he is giving up, at age 49, a promising long career in the House of Representatives—to become an aide to someone else. Yes, he will be part of history in the 44th President’s White House, but he would have been part of history in the 111th Congress, and thereafter.

But I am not surprised that Obama offered him the job. Obama, the man with the awkward middle name, could use some reinforcement among Jews, Christian Zionists, and other friends of Israel. At the tail end of the campaign, Rep. Jerrold Nadler (D-NY) was caught on camera telling a synagogue in Florida that Obama “didn’t have the political courage” to walk out of Reverend Jeremiah Wright’s Afrocentric church. Indeed, the close scrutiny of Obama’s life and times—including the tantalizing details about life with a Kenyan Muslim father and an Indonesian Muslim step-father—has only just begun. Muckrakers and biographers and kiss-and-tellers (some peddling truth and perhaps more peddling falsehood) will come from all corners of the earth. The White House rapid-responders will have to be ready.

And then, of course, Obama plans some profound shifts in American policy toward the Mideast and the Muslim world. The 44th President will need all the Jewish help he can get.

Yet there will be some pushback on the Emanuel choice from Obama’s own base—because Emanuel is not a “movement” leftist. Indeed, Steve Clemons, the well-known DC blogger, headlined his posting “Movement Left has Stroke: Rahm Emanuel Accepts Obama's Chief of Staff Offer.” Clemons, who seemed to know sooner than the rest of us that Emanuel had, in fact, taken the job, observed, “Many in the movement left are having a heart attack that the first major move of President-elect Barack Obama is the appointment of Congressman Rahm Emanuel as White House Chief of Staff.” Emanuel is a liberal, but he is not a Moveon/Acorn-type leftist. And that will go down hard with Moveon-ers and Acorn-ers.

So what would Emanuel be like in the White House? This inheritor of Chicago political tradition? On Thursday, The Politico referred to Emanuel’s “take-no-prisoners style.” Indeed, one thinks back to the 1987 film “The Untouchables,” in which would-be gang-buster Eliot Ness (played by Kevin Costner) is told by an Irish cop (played by Sean Connery), “You wanna know how to get Capone? They pull a knife, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue. That's the Chicago way!” Obviously Emanuel in the White House wouldn’t rub anyone out, but it’s a safe bet that Emanuel would play the hardest of hardball.

Meanwhile—and this is all part of the plan—President Obama can sail above it all, speaking in lofty tones to the adoring multitudes, preserving his own image from the chips and cracks that come from down-‘n’-dirty politicking. That is, Obama can take the high road, and Emanuel can take, well, the not-so-high road.

But this much is for sure. Obama has big plans for his presidency. The veteran street organizer knows tough tactics, even if he himself no longer wishes to engage in them. That’s for others now.

A veteran Democrat told me on Wednesday that the Obama campaign has $160 million—that's right, $160 million—left over from his campaign. After the campaign pays off its outstanding debts, covers legal and accounting fees, etc., it will still easily have $100 million left. To do what with? Well, one can assume that Obama means it when he says, as he has said several times, that he will look for ways to keep his political organization going, even after the election, presumably to advance his legislative agenda—and, presumably also, to get going on his 2012 re-election campaign.

In addition, Obama has 3.6 million donors on file, as well as 40 million people who are considered Obama volunteers. Obama can get things done with those sorts of numbers and quantities. And Emanuel will be at his right hand.

Wednesday, November 05, 2008

John McCain could never decide if he wanted to be a winner—or a martyr. He took arbitrary stands (he would prefer, of course, the adjective "principled") on issues that cut against the grain of his party, as well as undercut his potential victory coalition, which always had to include populist Reagan/Hillary Democrats. He opposed drilling for oil in Alaska’s Arctic National Wildlife Refuge and denounced those who mentioned Reverend Wright or Barack Obama's middle name. And he supported "comprehensive immigration reform" and "cap and trade" on global warming—liberal positions which were anathema to the GOP faithful, as well as turnoffs to moderate-conservative Democrats. All of these "high-minded" stances garnered McCain favor from newspaper editorial boards and self-declared establishment thought-leaders, but all taken as insults to the Republican base.

And yet when it came time for the general election, environmentalists, the mainstream media, and Hispanics all went solidly for Obama, joined by a sufficient number of swing Democrats, who saw no compelling reason to cross the aisle and vote Republican. In particular, McCain got no "credit," if that's the right word, from good-government types for not bringing up Obama's support for drivers' licenses for illegal aliens--probably the single best populist arrow the Republicans had in their quiver, and yet an arrow that McCain never fired.

To top it all off, McCain voted for the Wall Street bailout last month--once again putting the establishment ahead of the Republican base, putting pundits’ praise ahead of populist swing voters. And so, by the end of the campaign, plenty of activist Republicans had figured out what McCain really thought of them, and acted accordingly.

With apologies to Frank Sinatra, McCain ran the campaign "his way"--and just like the narrator in that famous song, he paid a steep price. Maybe that's what McCain wanted all along. It sure seems like it.

Thursday, October 23, 2008

The Devil Is In the Details: Another Obama Connection You Ought to Know About

Could Lucifer play a role in this presidential election? It may sound crazy, but one of the candidates in this race has publicly praised, even emulated, a writer-activist who himself paid tribute to Lucifer. That’s right, Lucifer, also known as the Devil, Satan, Beelzebub—you get the idea.

Do you think that admiring a Lucifer-admirer would make a difference to some voters?

If you’ve never heard of this true fact—and most Americans obviously haven’t—well, that might help to explain why John McCain is behind in the polls.

OK, you might be asking, where is this Lucifer stuff coming from? It comes from a man named Saul Alinsky, who devoted his life to left-wing agitation in Chicago. He also wrote two seminal books, “Reveille for Radicals” and “Rules for Radicals,” still regarded as key how-to manuals for left-wing activists.

But Alinsky was more than just a leftist; he was a genuine out-there crazy, someone who loved to shock and stun, just for the helluvit. And so in the first edition of “Rules for Radicals,” published in 1971, he offered this astounding dedication: “Lest we forget at least an over the shoulder acknowledgement of the very first radical, from all our legends, mythology, and history … the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom—Lucifer.”

This dedication is no secret. David Freddoso wrote about it in his book, The Case Against Barack Obama: The Unlikely Rise and Unexamined Agenda of the Media’s Favorite Candidate; and the inimitable Ann Coulter noted it, too, just last month.

And the connection between Alinsky and Barack Obama—and Alinsky and the left in general—is real enough. As John Fund, author of a newly revised book, Stealing Elections: How Voter Fraud Threatens Our Democracy, observes, Alinsky, who died in 1972, was a sort of godfather to all the activist groups that emerged in the 60s and 70s, the most famous (or, if you prefer, notorious) of which today is ACORN.

Fund notes that young Hillary Rodham was such a fan of Alinsky that she traveled to Chicago, four times, to interview him for an adulatory school thesis she was writing. And Obama is an on-the-record fan too: Fund quotes The Washington Post’s Peter Slevin, writing in 2007, “Obama embraced many of Alinsky’s tactics and recently said his years as an organizer gave him the best education of his life.” Slevin further noted that Obama’s and Hillary Rodham Clinton’s “common connection to Alinsky is one of the striking aspects of their biographies.”

OK, so the Alinsky-Obama connection is real. But the full truth about Alinsky, and whom he admired, is so wacky, or so horrible, that even the media have been reluctant to get into the story. And so it has received relatively little play. Oh sure, if John McCain had expressed admiration for a Lucifer admirer, that would have been news, but as we all know, there’s a media double standard on such things. That media bias is lamentable, of course, but for a Republican, it’s part of the strategic landscape—one more roadblock to factor into any GOP victory strategy.

Speaking of McCain, he would seem to have the greatest interest in taking Obama down a peg—or, according to the latest calculation from RealClearPolitics, about seven points in the polls. So why hasn’t he highlighted the Alinsky-Lucifer connection? Why hasn’t the McCain-Palin ticket raised this issue, knowing full well that if the candidates say it, reporters have to cover it? Good questions. Did I mention that the Republican nominee is down seven points?

In debate and argumentation, there’s a concept called the “rule of three”—that is, if you can come up with three examples to support your argument, you’ve got a pretty good argument. And so, for example, if one were to make the argument that Obama has strange radical associations, one could bring up Bill Ayers. And check, the McCain campaign has done that. And of course, there’s Reverend Wright, who McCain has stayed away from. So no check there. And no check, of course, for Alinsky-Lucifer. So McCain is left with the “rule of one,” which isn’t much of a rule. If McCain won’t bring up Wright, I guess it’s no surprise that he’s not bringing up Alinsky-Lucifer, assuming his campaign even knows about it.

The point of the “rule of three” is to make a sustained argument, to paint a comprehensive picture, to build an overall narrative—so that nobody can say that any one “hit” is just a cheap shot. That’s what happened to McCain with Ayers; the Obamans, and their allies in the media, said that it was just a “one off,” the sort of incidental association that happens in the course of a public career. And McCain had no good comeback, no additional opposition-research arrows to pull from his quiver.

So the Obama-Alinsky-Lucifer connection is left to float around in the vast soup of the Internet—plenty of mentions, here and there, but no real impact.

But had McCain really gone after Ayers AND Wright AND Alinsky-Lucifer, all at once, he would have had a strong argument that Obama was, and is, well out of the mainstream. And then all the information about Tony Rezko, Emil Jones, and the scandal-ridden Daley machine, would be all the more compelling to reporters and voters, because, as they would have to admit, a “pattern has emerged.”

And, for that matter, let’s talk about the great state of Illinois, where three governors in the last 40 years—Otto Kerner, Dan Walker, and George Ryan—ended up not only convicted, but imprisoned. And a fourth, incumbent Rod Blagojevich, may also end up in the clink. That’s quite a streak of corruption. And what does Obama have to say about any of that? And what did he know, and when did he know it?

If the McCain campaign had been on its game, its opposition researchers would have gone through every single day of Obama’s life since he first set foot in Chicago in 1987. Everyone he met, everything he did. And then, having amassed all that information, the McCainiacs would have made the rest of us know about it—in a sustained, organized, and unrelenting volley.

That’s how you win a presidential campaign, even amidst hard times for your party.

Tuesday, October 07, 2008

THE WALL STREET JOURNAL CONFIRMS: YES, IT IS A WALL STREET BAILOUT

Yes, it is a Wall Street bailout—a bailout for Wall Street, first and foremost. But don’t take my word for it. Trust the hometown newspaper, The Wall Street Journal, to provide the scoop. According to one informed estimate, the same Wall Streeters who got us into this mess could make another $100 billion for their help in “cleaning it up.”

The role of lobbyists, descending on the $700 billion—oops, make that $850 billion, including additional earmarks—bailout bonanza has been much reported on. Sample headline in The Hill newspaper: “With bailout passed, lobbyists look to get in the game.” The paper quotes Rich Gold, head of Holland and Knight’s government relations and regulatory practice, declaring, “This is going to be a big trend, in all honesty, for the next three to five years.” And outside-the-beltway birds of prey, too, are circling overhead, including Rudy Giuliani. The likes of Gold and Giuliani might look forward to making millions. But the real money, denominated in billions, is to be found back on Wall Street.

Let’s get right to the Journal: an article by Deborah Solomon and Aaron Luccheti in Tuesday’s edition. Here’s the lede: “The Treasury Department, seeking to jump-start its $700 billion rescue, is giving financial institutions two days to submit proposals to work as asset managers for the program. Treasury's request for proposals makes clear that it wants large, established firms with significant assets to work for the government's program to buy mortgage-backed securities and other distressed assets.” [emphasis added, all bolds to follow are mine]

In other words, the big get bigger. The Journal continues: “To qualify, institutions must already manage at least $100 billion. Firms that want to manage whole loans, such as residential and commercial mortgages, must already oversee at least $25 billion in such loans or prove that they have capacity to handle that much…. Market observers say there are just a handful of firms that could handle such a large portfolio of assets.”

So this is not for the little guy. And the big guys will apply. The Journal explains: “Since plans for the bailout plan were announced, a range of firms—from large investment banks to boutique real-estate companies—have been angling to grab some of the advisory business. Many are hungry for this work because their sales, financing and other traditional forms of real-estate business have dried up with the credit crisis.” Translated, this means that Wall Street firms, having destroyed their own nest, are now looking to Uncle Sam to re-feather it for them.

Some of the big companies mentioned by the Journal include Pimco, Blackrock, Legg Mason, J.P. Morgan Chase, and Morgan Stanley. “There are so many people who need something to do,” says John Douglas, former general counsel of the Resolution Trust Corporation (an earlier government bailout outfit, which disposed of $394 billion from 1989 to 1995), who is now a partner at the law firm of Paul Hastings Janofsky & Walker.

The Journal provides a look ahead into the new enterprise, now being sketched out behind closed doors in Washington and New York: “The asset managers will have significant power… the institutions are expected to assist Treasury in determining which assets to buy, when to buy them and whether to sell or hold them.”

Mallory Factor, a businessman in Charleston, S.C. with a background in New York finance, estimates that costs, fees, and expenses—to myriad advisers, lawyers, consultants, rating agencies, as well as money managers—associated with the bailout could total as much as one percent a year. One percent of $700 billion is $7 billion; if we multiply that over five years, that’s $35 billion. “But I think this will go higher than $700 billion, to easily more than a trillion,” Factor told me. “And the cleanup process could last a decade.” If so, then fees for Wall Streeters could easily hit $100 billion.

But that’s not all. As the Journal further explains, “One of Treasury's biggest hurdles will be handling conflicts of interest that are likely to arise. Companies that qualify for Treasury's program are likely to have a financial stake in the very assets they will be charged with buying and selling.”

That’s known as a conflict of interest, and oftentimes, folks who violate their fiduciary responsibility end up paying a fine, or even going to jail. But not anymore. In this Paulson-ized new world, it is understood that conflicts of interest come with the territory. As the Journal puts it, “Treasury doesn't expect to eliminate all conflicts of interest, but is hoping to minimize them, according to a person familiar with the matter.” Got that? The Department of Treasury will do everything it can to “minimize” conflicts of interest.

So now we know. Lobbyists and fixers will make millions, and Wall Streeters, even those with unclean hands, will make billions. We are looking at a bull market in morally hazardous profiteering. It’ll be a great time to be a muckraker, too—but the Wall Streeters, having written the rules that require them only to “minimize” their conflicts of interest, will just shrug off the criticism.

Once again, they will go laughing all the way to the bank. But of course, they’ve been there before.

Tuesday, September 30, 2008

How To Make the Bailout Bill (More) Acceptable.

Is the Axis of Arrogance—the bipartisan bunch supporting the bailout bill—plotting to get rich(er) off your $700 billion? Of course they are! That’s why they are so desperate to get the bill enacted, so desperate that they are practicing economic terrorism on nervous Americans, threatening to crash the economy, just to get their way.

For this Axis of Arrogance, some things are worth fighting for. Such as $700 billion, with the promise of plenty more where that came from—that’s worth fighting for. But here’s a way to take away most of their fun: Put into the bailout bill a stipulation that all governmental transactions have to be online, in real time, so that everyone can see what everyone else is doing.

One of the many reasons to oppose the bailout bill is the looming prospect that lobbyists will circle that $700 billion like “birds of prey,” as John McCain so memorably observed. Back rooms in Washington DC aren’t smoke-filled anymore, but the rooms where lobbyists meet are well in the back, out of sight. And you can be sure that every lobbyist in town is waiting to open up a new “practice,” which will consist mostly of figuring out how to help banks sell distressed financial instruments to the government at a higher price than they would otherwise get. (One suggested name for the new entity, by the way, is the Securitized Housing Insurance Trust.)

And of course, Members of Congress, and activist groups such as ACORN, will seek to oversee the process of doling out that $700 billion. That’s right, the same people who brought you Fannie Mae and Freddie Mac—and before that, the Savings & Loan bailout—are looking forward to “serving” the public once again. They just don’t want you to know about it—and they certainly don’t want you to see it.

But there is a solution: full disclosure. As Supreme Court Justice Louis Brandeis observed nearly a century ago, “sunlight is the best disinfectant.” And that has always been true. In the 90s, then-House Speaker Newt Gingrich put actual drafts of legislation online, through the Thomas system. More recently, Sen. Barack Obama has teamed up with conservative Republican Sen. Tom Coburn of Oklahoma to begin making federal spending more transparent. And conservative activist Grover Norquist has teamed up with Ralph Nader to make state government spending fully transparent; already, in nine states, you can go online and see how they are spending your money.

So now, before anybody even thinks about enacting a bailout bill, let’s make it totally transparent. As in totally transparent. That is, put all the distressed financial instruments on the Internet, via eBay—or better yet, some totally open-access system—so that everyone can analyze the documents and make a bid for them. That would set a fair-market price for each of these pieces of paper.

Now Secretary Paulson, of course, has said he wants to pay more than fair-market price for these securities, as a way of paying off his friends. Oops, I meant to say, “injecting liquidity into the system”! Forgive me.

But if the Securitized Housing Insurance Trust, or whatever it’s called, chooses to overpay for an instrument, well, that will all be online, fully visible to one and all. And Presidents and the rest of the political class will be held visibly accountable.

Now let’s add a provision mandating that all lobbying and “consulting” fees be fully disclosed. We might still get a legislative turkey, but at least we’ll know how badly we’re being ripped off. Down to the penny.

Friday, September 26, 2008

In Washington, it’s a showdown between the representatives of Wall Street and the representatives of Main Street. But have you noticed that the old partisan alliances are reversed? It’s the Democrats who are now the Wall Street Party. And Republicans—with the conspicuous exception of President Bush—are now the Main Street Party.

Consider: President Bush proposed the $700 billion plan; after days of hiding behind the Secretary of Goldman Sachs, Henry Paulson, Bush finally emerged from the sidelines Wednesday night to tout the plan in prime time. Just this morning, he spoke again in favor of his plan, while again taking no questions from pesky reporters.

But the Congressional Democrats, who mostly despise Bush, are also mostly for the Bush plan. Sure, they made some cosmetic changes in the bailout proposal, but they have never wavered in their basic endorsement.

So who’s against the plan? It’s Congressional Republicans who are getting in the way. They are the heroes of the hour. Although outnumbered, these brave Capitol Hill GOPers have stopped official Washington in its tracks. Why? Because the Democratic majority, supporting the bailout, doesn’t actually dare to vote for it unless they know that most Republicans will vote for it, too. And that’s because the Democrats fear that this bailout legislation is deeply unpopular with the country. So the only way that Democrats can vote for the bill and be safe this November is if Republicans also put their names on the legislative dotted line. Not a profile in courage for Democrats, of course, but it’s smart practical politics for them to demand some “cover.”

But let’s step back a minute. How did it come to pass that President Bush is siding with Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi? What thought process led the Administration to support a big-government bill that the Republican grassroots all despise? Bush, of course, never met a Cheney-esque secret plan that he didn’t like. And it would also seem that seven-and-three-quarters years in office have totally disconnected him from rank-and-file Republicans. Remember his support for the ill-fated immigration “amnesty” bill back in 2004? And after that misguided legislation was beaten back, he proposed it again in 2007. What was he thinking?

For their part, the Democrats are emerging as the new party of the rich, the party of Wall Street, the party that champions financiers at the expense of producers. For years now, the most affluent precincts in the country—mostly on the two coasts—have been solidly Democratic. And in 2008, the polls show that upper-income voters mostly support Barack Obama. And Obama, of course, guided by the likes of Robert Rubin, has been quietly supportive of the deal. Indeed, Obama personally epitomizes the Democrats’ new political arrangement: He was raised mostly poor, then worked mostly with the poor, but now he is rich and works mostly with the rich—his campaign is a well-financed corporation. Yet he has maintained his popularity with the poor. For their part, the Republicans now represent the majority of middle-income voters—Main Street. But the Democrats, with their political pincer movement, from the rich above and the poor below, have the clear electoral advantage in 2008.

So it’s understandable that the Democrats would want to take care of “their” people at the top. That’s the revised Democratic model: The same old socialism for the poor, of course, in the form of the bureaucratic welfare state, and a new kind of socialism for the rich, in the form of this bailout.

In addition, the Democrats have some sordid secrets to protect—and Paulson & Co. are helping them keep hidden. Much of the overall financial crisis can be traced back to bad mortgages made to unqualified buyers at the behest of Democratic poverty advocates; it was a neat arrangement, poor Democrats got houses, as rich Democrats got richer by manipulating the financial paper. But the Bush administration, eager for a deal with the Democrats, has made it clear that it won’t point fingers. For their part, Senate Banking Committee chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) are returning the favor by pushing the bill forward.

So only Congressional Republicans—the single most implacable figure being Sen. Richard Shelby, the Rock of Alabama—are taking a firm stance against this monstrosity. They even seem to have brought along John McCain, who has taken various positions on the bailout over the last few weeks. But bravo for the Congressional Republicans. After years of embarrassments and scandals, the Capitol Hill GOP has rediscovered principle and honor. And so rediscovered the glory of genuinely representing the people, against the powerful.

I am reminded of Aragorn’s Battle Speech at the Black Gate in the third of the “Lord of the Rings” trilogy. The King tells his outnumbered troops:

I see in your eyes the same fear that would take the heart of me. A day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship, but it is not this day.

An hour of wolves and shattered shields, when the age of men comes crashing down, but it is not this day!

This day we fight!!

By all that you hold dear on this good Earth, I bid you stand, Men of the West!!!

And so, in the Tolkien story, the Men of the West are triumphant. But today, in the real world, could the Republican Men and Women of Capitol Hill yet prevail? The Washington DC conventional wisdom, as of Friday, is that the Bush Administration/Democratic/Wall Street juggernaut will eventually bring the Congressional GOP to heel. If so, that would be the final victory of Wall Street over Main Street.

Thursday, September 25, 2008

Who should we bail out: Wall Street? Or Main Street? According to today’s reports, Washington has made its choice clear—Wall Street will get the bailout. The White House and Congress, Republicans and Democrats, seem to agree: Help Goldman Sachs, not Joe Sixpack. But there are alternatives, if the people will order their “leaders” to pay attention to them, instead of the lobbyists and bankers who are currently calling the shots.

The emerging bipartisan consensus—the original bailout, plus a few new provisions concerning oversight—is the epitome of “trickle down.” Wall Street made bad decisions, but Wall Street is too big to fail, so we must give them $700 billion, so that the rest of us can avoid a recession. Got that? The Wall Street message is, “We screwed up, so give us money, otherwise, you’ll be sorry.”

Amazingly, that argument—top-down piracy at its most naked—is carrying the day in Washington. If one ever needed proof that the government is the tool of the ruling class, this is Exhibit A.

So what’s the alternative? Mallory Factor, a South Carolina businessman, has a better idea: “Bail out homeowners, not lenders,” he says. “Any qualified buyer who wants to buy a house,” he says, “could buy one at a guaranteed low interest rate, of, say, 3.5 percent. And any qualified homeowner who wants to refinance could get the same rate.” If that happens, Factor predicts, “There would be a flood of liquidity into the system, as people bought houses again, which would also help reduce the housing-stock overhang. In addition, as people refinanced, all these instruments, such as collateralized mortgage obligations, which Fannie Mae and Freddie Mac have choked on, would once again start performing. And that would save the banks and many investors, by saving homeowners and homeownership.” In other words, trickle up, not trickle down.

The current interest rate for a standard 30-year mortgage is around 6 percent. At that rate, the payments on a $300,000 mortgage work out to $1,799.65 a month. By contrast, at Factor’s proposed rate 3.5 percent, the payment would be just $1,347.13 a month. That’s a whopping difference, especially for homeowners who might have paid more for a house than it is currently worth. And at 8 percent, which many adjustable rate mortgages (ARMs) have shot up to, the monthly bill is a prohibitive 2,201.29 a month.

This interest-rate buy-down is the elegant heart of Factor’s plan. And who would do the buying down? “The federal government,” Factor answers bluntly. “This is a government buy-down of interest rates, but it would benefit homeowners first, and only then, second, the banks.” But, he notes, the buy-down is only for qualified borrowers. So the banks would still lose a lot of money. Which is good, since they need to be reminded not to make this mistake again. And since there’s no Fannie or Freddie any more to buy these dubious loans in the future, the banks will have to be careful, once again, about who is a qualified borrower, and who is not. The government, Factor reminds, would only be on the hook for the costs above 3.5 percent—the banks would be responsible for the first 3.5 percent, and for the principal.

That’s bad news for bankers, Factor adds, but good news for taxpayers: He estimates that his interest-rate buy-down plan would cost Uncle Sam perhaps $200 billion (more if interest rates rose, less if interest rates fell). But it would surely be cheaper, he suggests, than the trillion or more that the Washington plan seems destined to cost. And once again, Factor’s plan would focus on Main Street, not Wall Street—surely a substantial virtue in and of itself.

“The Washington plan,” Factor observes, “is like the government going to a bunch of car dealers, and saying, ‘You’ve got a bunch of cars in your warehouse that nobody wants to buy, because most of them are lemons. How did this happen? Because you didn’t bother to kick the tires or otherwise examine them before you ought them from the factory. But because we’re the government, Uncle Sugar, we will buy them off you, deliberately overpaying, big, so that you can take our cash and get back in the car-retail business.’”

And yet there’s an obvious “moral hazard” in that arrangement: How do we know that these myopic car dealers will do a better job tire-kicking the next time?

Washington’s answer is “more regulation,” but that regulation generally just creates another layer of bureaucracy, as opposed to genuine protection. Factor’s approach is much simpler: Under his plan, banks will get a bunch of new mortgage applicants all seeking the government-subsidized rate of 3.5 percent; then the banks, for their own protection, will have to figure out who will be able to pay back their loans. Of course, if the rate were a guaranteed 3.5 percent, plenty of homeowners would rush to refinance their existing higher-rate mortgages. That’s fine with Factor: “That would create the liquidity that banks need.”

Factor freely concedes that his solution is not perfect: “There are no really good answers to this disaster,” he allows. “There are just less-bad answers, that minimize the cost to the taxpayers, and that teach the banks and Wall Street a harsh but useful lesson in market economics.”

And of course, to the rest of us, weary of being ripped off by Wall Street shysters who are using Washington to rip us off a second time, the Factor Plan sounds like a pretty good deal.

Wednesday, September 24, 2008

Jim Pinkerton's takes on the financial crisis, published in Politico.com's "Arena" section. I published this last Sunday:

The biggest flaw in the Administration bailout package: It could all happen again. The system doesn’t need just fixing, it needs decentralizing. Financial institutions should be big enough to fail—and never any bigger. We need compartmentalization, also known as federalism.

The current crisis was caused by mega-financial institutions that could gamble their money—and lose it. And they did. But first, they grew to the point where they couldn’t be allowed to fail. That’s why even a staunch free-marketeer such as Larry Kudlow supported the AIG bailout. “A collapse of AIG would have been unfathomable,” he wrote on Saturday. “It is simply too interconnected globally.”

Well OK, then, AIG was too big. When even free-marketeers want the government to step in, that’s proof that size matters. In a bad way. But the American people cannot let themselves be hostage to the financial megalomania of casino-capitalist empire builders.

It might, indeed, be the responsible thing to vote for a bailout, but it is irresponsible to allow such a meltdown to happen again. And it will happen again if banks, investment houses, and insurance companies are allowed to grow this big once again. Adding another layer of regulations and record-keeping will make work for more lawyers and more accountants, but if the basic business model survives—gambling with other people’s money, and lots of it—then we will right back into deep doodoo soon enough, except that the dollar totals will have a few more zeroes. Remember Sarbanes-Oxley? What good did that do?

As my colleagues at the New America Foundation, Sherle Schwenninger and Michael Lind, have argued for years, we need different kinds of banks to do different things. So the Depression-era Glass-Steagall Act—which solved this problem once before—should be restored, so that the bank down the street once again is limited to only accepting deposits from its neighborhood and only making loans to locals. That’s a boring low-margin business, to be sure, but it’s mostly a safe business. Meanwhile, on Wall Street, investment bankers and speculators would be free to speculate, but they wouldn’t be free to speculate with the capital base of Main Street.

In addition, the states should reclaim their role as laboratories of democracy—and laboratories of the economy. Leaders of each state should figure out how much money they are losing in this deal—that is, how much of that projected $1 trillion they are “contributing.” Or, to put it another way, how much of an income transfer is the state of New York reaping? How much is Manhattan gaining at the expense of all the rest of us?

Politicians across the 50 states might be tempted to demagogue these wealth-transfer data, but there is the not-so-little concern of avoiding a depression.

Instead, politicians should say, “I will vote for this bailout, AND I will also insist that we compartmentalize, or federalize, the solution. How? We should establish a state bank, or a regional bank, to keep capital right here in (fill-in-the-blank) state or region.” If South Carolina and North Dakota keep more of their money in the first place, to be invested in local projects, that will be good news for South Carolinians and North Dakotans. And it will be bad news for money-hungry Manhattanites, plotting their next incomprehensible derivate swap; they will be free to gamble their money, and nobody else’s.

If the Bush administration really believed that the Paulson proposal was absolutely vital, it would be accompanied by a) the President's prime time speech to the nation; b) the resignations of top administration officials who have been overseeing the situation heretofore; or c) a tax increase, specifically, a "Tobin Tax" on speculation, perhaps balanced with a reduction in the tax rate on long-term capital gains. But if the administration can't rouse itself to even do a), then it's obviously not that serious a situation.

The situation of Paulson himself is particularly egregious. Having been in charge at Treasury for more than two years and issued innumerable "sunny skies" forecasts, he now wants a $700 billion blank check to oversee the bailout of his once and future colleagues.

His swift exit from the scene ought to be a rock-bottom minimum requirement.

Thursday, September 11, 2008

Here's the most important material:LONDON -- Britain's MI6 intelligence service has issued a global-wide priority warning to all security services that Islamic terrorists now are closer to obtaining material to create a "dirty bomb" to launch against Western targets, according to a report from Joseph Farah's G2 Bulletin.

Osama bin Laden long has made this a priority and reinforced it with regular messages from his mountain redoubt in the northwest province of Pakistan. He repeatedly has said every "true Muslim must make it his duty to assist in all ways possible to find the next powerful weapon to destroy our enemies."

Last weekend, Pakistan elected a new president, the controversial Asif Ali Zardari. He had served a nine-year jail term on corruption charges he has strongly denied. But MI6 agents fear he has little ability to provide strong leadership against the new wave of Islamic extremism al-Qaida has launched across the country.

Groups such as the newly formed Pakistan Taliban have proclaimed they are focusing on creating a "dirty bomb."

MI6 agents based in Islamabad fear the mounting instability in Pakistan will make it easier for them to do so.

While Pakistan is the only Muslim country with a nuclear arsenal, it has in the past provided its expertise to Iran.

Pakistan's Islam bomb was developed in the 1990s by the rogue scientist, Dr. Abdul Qadeer Khan. He sold the results to pariah states like North Korea and Libya. He was placed under house arrest by Pervez Musharraf.

So now, seven years later, what to do Americans think about the prospects for another attack? And the aftermath? A new nationwide poll provides some answers.

According to the Washington DC-based Benenson Strategy Group, nearly two-thirds of Americans say that they are aware of the danger of a “dirty bomb” (that is, a radiological dispersion device). But less than half, 47 percent, say that they are confident that the government is prepared. And only 42 percent say that they themselves would know what to do in the wake of a dirty-bomb attack. Just 34 percent say that the government has done a good job of informing people about what to do.

A dirty bomb is especially insidious because components for such a weapon are spread so widely across the United States. Deadly “dual use” materials are found in medical offices, industrial sites, and, in minute quantities, even in household devices, such as smoke detectors. And yet radiation is radiation: If enough radioactive material is gathered together, and then dispersed in a malevolent manner, thousands of Americans, even millions, could be at risk. That’s a problem.

The Radiological Threat Awareness Coalition (R-TAC), which commissioned this opinion survey, believes that the government has indeed done much to prepare for a dirty bomb—but it needs to do more. R-TAC believes that the government has been less effective at communicating information about what to do in the wake of a dirty-bomb attack. And yet public awareness isn’t just a job for the government, it’s a job for all of us.

Interestingly, just 27 percent of Americans know that a medical antidote to radiation poisoning exists. Broadening awareness of post-attack medical solutions might not be everyone’s duty, but if—some say when—such an attack comes, everyone will surely want to receive treatment. So now is the time to look ahead, and think ahead.

The challenge for all those involved in homeland security, in both the public and the private sector, is to strike the right note. We must not be naïve about the risks, but we must also not give in to either panic or fatalism. With the right mix of duty and diligence, we can protect our country while at the same time protecting our civil liberties.

To keep us safe, R-TAC envisions a Pyramid of Preparedness. Here’s the architecture: At one of the four corners of the base, there’s the government—federal, state, and local. These are the people and agencies tasked with overseeing and coordinating the effort at detection, and, if that fails, response and recovery. At another corner of the pyramid are the men and women of science—those who can build the sensors, those who can invent the cures. At another corner is the business community—those who can mass-produce, at the lowest possible cost, the tools for protection and remediation. And at the fourth corner is the citizenry. As individuals and as groups (including R-TAC), we all have an obligation. In a time of possible emergency, we are all our brother’s, and sister’s, keeper.

Together, R-TAC hopes, the four corners at the base of this Pyramid will converge into an Apex of Awareness—alert to threats, quick to respond. We have seen the pyramid on the back of a dollar bill, the one with the eye in it. That image is a reminder: If we are looking out together, we are more likely to be safe.

The results of the R-TAC public opinion survey tell us that the America people are aware of the dirty-bomb danger, but they need to know more. They need to see more—and that’s where the Pyramid of Preparedness comes in. It might seem visionary, but we have all seen what happens when there is no vision.

Saturday, August 02, 2008

Sunday, January 27, 2008

Voting With My Feet--Why I Quit Everything to Go Volunteer for Mike Huckabee.

(From the January 28 issue of The American Conservative .)

Warren, Michigan -- I love Ed Rollins like a brother, but it’s Mike Huckabee who inspired me to return to politics—for such a time as this.

Rollins was my boss at the Reagan White House in the early 80s, and then I followed him to the Reagan-Bush ’84 re-election campaign—and thus into morning-in-America glory. We have kept up ever since. And over the last few years, we have both returned to the church; he’s Catholic, I’m Protestant. And we both, from our different perspectives, became fans of Governor Huckabee. Ed and I both agreed that Governor Huckabee combined solid conservatism, a gentle manner, and a willingness to try new things that reminded us of, yes, Ronald Reagan.

So when the call came, I was ready to hear it. I resigned from Fox News and from Newsday, and signed on as a Senior Adviser, traveling around with the campaign. (I don’t know what my status with TAC is; if this piece runs, I’ll know I’m still a contributing editor.) But don’t let my fancy new title fool you: Among my greatest accomplishments has been figuring out how to print a document from my laptop at Kinkos. And yes, I’m re-experiencing campaign life: such as not being able to tell whether your heart is beating faster because you hear something inspiring, or because you think you might have made an error in a policy paper, or because you have drunk too much coffee and eaten too many donuts.

Actually, not donuts, because the Huckabee campaign is lean, if not mean. Without anywhere near the sorts of resources commanded by some other candidates, we bump along without the perks that many campaigns enjoy. Don’t get me wrong: It’s not The Grapes of Wrath for us out here, but it’s not the J.W. Marriott, either.

As for Governor Huckabee, he is a low-cal man. Many people know about his epic diet—the loss of more than 100 pounds—but what sets Governor Huckabee apart from most weight-losers is that he was governor of Arkansas at the time, and so he had the opportunity to convert his own experience into a teachable moment for the citizens of his state. Some will call it sappy, others will call it “Love Thy Neighbor.” Now he is a believer in prevention, including both better diet and more exercise; as he says on the stump, “We don’t have health care, we have sick care.” That is, people stop taking care of themselves, they get sick prematurely, and somebody pays the tab. There’s not enough money for that kind of health care.

But the governor is not judgmental; he knows he came from the sort of family where eating too much wasn’t such a bad idea—because you could never be too sure about that next meal. As he reminds audiences, “I know the stone from which I was hewn, I know the rock from which I was quarried.”

Like the minister he once was, he pauses to offer a word of encouragement—to an old lady in a walker, to an unemployed husband and father, or to a gymnasium full of Christian homeschoolers in St. John, Michigan; he first apologized for interrupting their basketball game. Then he said to them, “You will face giant challenges in your life, but you are never taller and stronger than when you are on your knees praying to God.” Then he wrapped up, told them to have a good game—and “remember to show sportsmanlike conduct.”

But for adults, Governor Huckabee has a more serious message. Here’s the headline of The Detroit Free Press on Tuesday, January 15: “Huckabee appeals to working class/On factory tour, he cites tax plan, family-friendly efforts.” The Governor is for free trade, but he is also for fair trade. If the Chinese are “cheating” by putting lead paint on toys and poison in dog food, well, that’s not fair. If American workers have to meet stringent labor and environmental standards, then they shouldn’t be left unprotected to compete against workers who don’t get the benefit of those social-contract basics. Makes sense to me. Is it really a good idea to export our factories overseas, so that the American middle class is hollowed out? So that others can generate CO2 without regard to emissions controls? So that China, say, can develop its arsenal of non-democracy? I don’t think so.

Mike Huckabee, mindful of the Truman precedent, wants a new Fair Deal for Americans. He cares about their jobs, but he also cares about traditional family values, including the rights of the unborn. Plus, he was a great governor, he is a great speaker, and he is a very nice guy.